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Westpac's new best friend? Australian Federal Court rejects settlement with regulator

BIScom Subsection: 
Nigel Morris-Cotterill

It's one of those times where there is double take. Are you reading it right? A Court has said it will not approve an agreed settlement between a financial institution and a regulator? Oh, OK, it must be that the Court thought that the penalty was too light and he's sent the parties away to decide how much more should be paid, or perhaps penalties beyond money should be added?

No, that's not it. It's far more fascinating than that.

(previous story)

Right around the world, the USA has convinced regulators and governments and even major prosecution departments of the value of settlements. In civil cases that's what they are called. In criminal cases, they are called "conditional plea agreements," and their supporters say they result in quick and cheap determinations. Their detractors (of which this publication is one) says they are nothing more than a bribe as a result of which a conditional discharge is entered - provided the bribe is big enough. The Financial Action Task Force has endorsed the practice. The UK's Serious Fraud Office adopted it under its former Director and, when he handed over to an American prosecutor, expressly said that he was confident the system would continue.

So, here's why the Australian case matters. First, as in the Victoria court, there is the obvious concern that plea agreements, regardless of the outcome, give power to the executive and take the power for sentencing away from Judges. Further, Judges are part of a system under which justice must be seen to be done (at least they are in properly run countries) and plea agreements are dirty little deals done in secret. Judges are the last safeguard of democracy against the excesses of government both elected and unelected. The important thing about plea agreements and settlements is that they become Court Orders. They bear the seal of the Court. They carry the authority of the Court.

ASIC may be licking its wounds for having failed to properly prepare its case assuming that all it had to do was turn up and say "stamp this." WestPac may be curled up in a corner thinking "what do we do now? What if he insists on a fought out trial and all the stuff we didn't want to become public will become public, especially if the Judge asks awkward questions?"

For truth and justice and the rule of law, Perram, J deserves credit and it is hoped that others follow his example. After all: it's what they are paid to do.

Further Reading:
https://clmr.unsw.edu.au/artic... (2013)